General Motors (GM) and chip manufacturer GlobalFoundries have signed a long-term agreement for the supply of US-made processors. The deal is aimed at helping GM avoid factory-halting chip shortages, which impacted car production during the COVID-19 pandemic. The three-year agreement, which establishes a dedicated capacity exclusively for GM’s key chip suppliers at GlobalFoundries’ New York fabrication facility, is the first of its kind. The announcement highlights a new approach by automakers to securing semiconductors, and also shows a new way for chip manufacturers to finance US expansion.
GlobalFoundries CEO, Tom Caulfield, stated that the GM capacity would be installed in an existing factory in upstate New York, but declined to specify how much of the factory’s output would be dedicated to GM. GM reported that it is streamlining the number of unique chips in its cars and securing capacity for its suppliers to make these chips as the overall number of chips is expected to increase. “We see our semiconductor requirements more than doubling over the next several years as vehicles become technology platforms,” said Doug Parks, GM head of global product development.
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The chip shortage has dramatically changed the way carmakers deal with their chip suppliers, with several auto companies creating teams and divisions to better secure chip supply and design digital platforms for future cars. Chip manufacturers stated last year that it was time for the auto industry to invest in the multi-billion-dollar facilities needed for producing chips.
GM’s rival, Ford, reported a $2 billion shortfall in fourth-quarter profit due to its inability to acquire chips and other supply chain problems. Ford’s Chief Financial Officer, John Lawler, stated that securing adequate supplies of chips continues to be “hand-to-hand combat.” The automaker is putting “corrective actions in place” and working closely with its supply chain, including Tier 2 chip suppliers. In late 2021, GlobalFoundries and Ford announced a non-binding agreement that could involve increasing production capacity for Ford, though few details were provided.
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Tom Caulfield stated that GlobalFoundries is in talks with nearly all major global automakers and the agreement with GM does not mean there will not be additional deals with other manufacturers. Auto Forecast Solutions estimates that by the end of 2023, almost 18 million vehicles will have been removed from production plans due to the chip shortage.
